Super regulator needs to identify future risks

Simon Botherway said the super regulator needed enough staff to handle the workload. Photo / Dean Purcell

The new super regulator should have a team of people focused on identifying future risks to investors, according to the man in charge of helping to set it up.

Simon Botherway, chairman of the Financial Markets Authority establishment board, said he saw an increased role for market intelligence gathering in the new authority.

"It would look at financial market innovation and where things are going - where the risks might lie ahead of time."

Botherway said the team would need to be adequately resourced with five to eight people, although the board was conscious of the Government's budgetary restraints.

The team would handle any tips and referrals that came into the FMA as well as deciding what to do about new products.

Market intelligence gathering is not under one team at the Securities Commission, which has been criticised for not being able to police products outside its jurisdiction, like the failed Blue Chip investment scheme.

Botherway said that scheme would be the sort of product he would expect to be picked up by a specialist team.

The team would also be expected to look overseas at any risks being identified by foreign regulators.

"It's about keeping abreast of not only local but international developments and understanding where other regulators perceive the risks to be - what is happening in terms of products."

Botherway believed the FMA, which will combine the functions of the Securities Commission, some of the functions of the Registrar of Companies and the Government Actuary, and some of the regulatory roles of sharemarket operator NZX, would need more staff than it employs because of an expanded role in licensing financial advisers, trustees, auditors and, potentially, fund managers.

Some market commentators have called for the regulator to be based in Auckland but Botherway said it was likely the FMA would have a presence in Wellington and Auckland and, possibly, Christchurch as well.

The establishment board planned to give a draft statement of intent to Commerce Minister Simon Power by the end of next month.

Applications have already closed for a new chief executive and a short list is expected next month.